No change to earnings forecasts. Maintain HOLD and target price of S$2.58.

Entry price: S$2.45.

WHAT’S NEW

4QFY18 total page count decline widened to 14.3% y-o-y.

~ SGinvestors.io ~ Where SG investors share

Our page count of The Straits Times recorded a decline of 14.3% (4QFY17: -9.9%, 3QFY18: -12.5%), an acceleration on both a y-o-y and q-o-q basis. For the three segments, recruit ads page count fell 13.2% (4QFY17: -21.4%), classifieds fell 15.8% (4QFY17: -17.9%) and display fell 14% (4QFY17: -6.6%).

FY18 total page count declined 13% y-o-y.

Total page count decline on a full-year basis was also larger at 13% y-o-y (FY17: -9.9%), led by double-digits declines for all three segments. Save for the recruit segment, the other two segments saw widening decline rates.

STOCK IMPACT

4QFY18 print revenue expected to decline 11-12%.

Given the slightly higher percentage decline in page count for 4QFY18, we expect print revenue to weaken by more than the 9-10% that was seen in prior quarters. This implies a full-year print revenue decline of ~12%.

Earnings upside risk of 2% assuming print revenue decline of 12%.

Our earnings estimate of S$209m will rise by 1.6% should full-year revenue decline come in at 12% vs our current assumption of 13%. Our current valuation of S$2.58 will edge up by 1% to S$2.61 in that scenario.

Wane in property advertising could see print revenue decline re-accelerate in future quarters.

Post the cooling measures, property advertising likely fell. Tailwinds from the housing market are dissipating, and the de-coupling between print revenue and page count decline seen in the last two quarters may reverse in the future.

It seems unlikely that digital ad revenue growth can fully offset the drop in property advertising given the former only made up 8% of 9MFY18 revenue.

Property ad counts have indeed declined.

A cursory count of display ads by type and size in the Saturday Straits Times over 4QFY18 suggests this to be the case. Property display ads not only saw a progressive decline in page counts, it also saw its proportion against total pages slip from a peak of 10% in late-June to ~4-5% at present.

EARNINGS REVISION/RISK

No change to earnings or dividend estimates.

VALUATION/RECOMMENDATION

Maintain HOLD and target price to S$2.58.

Our target price remains unchanged at S$2.58, which values the media business on a DCF basis (WACC: 6.1%, terminal growth rate: 0%), M1 at target price of S$1.55, healthcare at 20x 2018F PE and the rest of its listed entities at market value.

While the media business is not out of the woods yet, there is upside risk from potential acquisitions on the property front that could mitigate the weakness.

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